Berkeley Energia Limited (LON:BKY) has pulled in US$10mln of new financing at a premium to the current share price – money that will allow it to maintain the current rate of progress at the Salamanca uranium project in Spain.
The Resource Capital Fund (RCF) is ploughing in half the cash by investing in shares 15% more than the 30-day average price.
This commitment, Berkeley reckons, highlights “the strength of the project and its robust economics even at the current low uranium prices”.
RCF has also agreed to pay US$5mln to secure a 0.375% net smelter royalty.
This portion of the funding is “consistent with the company's focus on minimising dilution in order to protect the equity value of its shareholders”.
Managing director Paul Atherley said the cash injection would allow Berkeley to continue the initial infrastructure development ahead of main construction and financing later in the year.
“In addition it will allow us to target a number of the high value exploration targets looking for additional Zona 7 style deposits over the next few months,” he added.
“The results of the optimisation studies being undertaken as part of the definitive feasibility study to be published in the next couple of months are expected to demonstrate the Salamanca project's robust economics even at the current low uranium prices."
Backed by some of the most successful uranium entrepreneurs in the business, in the shape of Robert Behets and Ian Middlemas, the men behind the rise and billion dollar sale of Mantra Resources to a Russian uranium giant, and run by seasoned mining promoter Paul Atherley (Murchison, Leyshon), Berkeley has all the key skills to make a success of the Salamanca project.
And the project itself has real promise. Following the inclusion of a new area of mineralisation known as Zona 7 in November of 2015, a pre-feasibility study for Salamanca envisioned the production of 4.3 mln pounds of uranium per year at steady state, averaging out over an 18 year mine life at 3 mln pounds.
The cost to get that production up and running will be relatively modest too, in mining terms, at just US$81.4 mln for an initial operation at Retortillo. Cash flow from that mine can then be steered towards the funding of development of two other mineralised areas, Zona 7 and Alameda.
The study predicted that life of mine cash costs should run at US$17.5 per pound, which compares favourably enough with the prevailing spot price of around US$28, and extremely well to the more aggressive longer term prices that most analysts are modelling. Contract prices are expected to come in at around US$44 per pound, at which price the project generates a 57% IRR.
What’s more, ongoing definitive feasibility work is indicating that there could be scope to cut costs further.